All Canadian resident taxpayers, including non-resident trusts deemed resident in Canada due to Foreign Accrual Property Income ("FAPI") rules, must file a T1135 if the total cost amount of all "Specified Foreign Property" owned by the taxpayer at any time in that year exceeded $100,000 CAD. There are certain exemptions to this filing requirement, including mutual fund corporations or a person whose entire taxable income is exempt from Part I income tax, but most taxpayers who cross the $100,000 threshold will be responsible for filing a T1135. Partnerships that hold Specified Foreign Property in excess of $100,000 must also file a T1135 if the non-resident partners’ share of income/loss is less than 90% during the reporting period.
The $100,000 threshold is not based on fair market value (which is how much the asset would sell for in the open market). It is based on the Adjusted Cost Base ("ACB"), which is the cost of the assets. Furthermore, the $100,000 is calculated as the sum of all Specified Foreign Property owned by the taxpayer. This means that if a taxpayer owns foreign property across multiple countries and the total cost of all property exceeds $100,000, he or she must file a T1135. It should also be noted that once the $100,000 threshold has been passed during a year, taxpayers cannot dispose of a foreign asset to bring the cumulative cost of the assets back under $100,000; as soon as the threshold is reached, a T1135 must be filed. That said, if the next year the cost is under $100,000 then a T1135 is unnecessary. In addition, where a taxpayer receives a T3 or T5 slip relating to the Specified Foreign Property, no additional disclosure is required – however, the cost of the Specified Foreign Property still counts towards the $100,000 threshold. Our experienced tax lawyers Canada can advise you as to your T1135 filing requirements.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."